Massachusetts recently joined a handful of other states (read: States over the Edge and Testing Boundaries with Business Activity Tax Nexus) by issuing a final revised regulation adopting a bright-line, $500,000, nexus threshold for its corporate excise tax. See generally 830 CMR 63.39.1. Echoing the language of the Wayfair decision, the state’s revised nexus regulation provides that “the Commissioner will presume that a general business corporation’s virtual and economic contacts subject the corporation to the tax jurisdiction of Massachusetts under M.G.L. c. 63, § 39, where the volume of the corporation’s Massachusetts sales for the taxable year exceeds five hundred thousand dollars.” 830 CMR 63.39.1(3)(d).
The Massachusetts guidance also goes a step further than other states’ recent guidance, such as Pennsylvania and Texas, by including sales of a related person engaged in a unitary business with the taxpayer in calculating the $500,000 threshold, if without such inclusion no member of the unitary group would otherwise be subject to the tax. Id. The regulation also provides that owning or using intangible property in the state may likewise create nexus if the property is a source of gross receipts and the activity is “purposeful.” 830 CMR 63.39.1(3)(b)(7). Similar to other states, however, the new regulation acknowledges the existence of P.L 86-272, noting that “a general business corporation that is subject to the tax jurisdiction of the state because its activities are described in 830 CMR 63.39.1(3)(b)8 . . . may nonetheless be exempt from the income measure of the corporate excise, though not the non-income measure or minimum excise, by reason of the federal law, Public Law 86-272.” 830 CMR 63.39.1(3)(c).
As states continue to expand the boundaries of business activity tax nexus, and states each forge their own unique path, taxpayers will have to be mindful of these nuanced and varied approaches. Additionally, apportionment sourcing rules will be increasingly important as many of these bright-line nexus thresholds (including Massachusetts and Pennsylvania) rely on apportionment sourcing rules for purposes of measuring a corporate taxpayer’s in-state receipts (or, sales) for purposes of the threshold.